NEW YORK CITY-In the wake of SL Green’s plans to acquire Reckson Associates for $6 billion, analysts are putting the deal under the microscope, and some wonder if it’s the best deal for Reckson.

In a report issued by Bank of America’s John Kim and Ross Nussbaum, the analysts state the company lowered Reckson’s rating from buy to neutral based upon the deal that would give Reckson shareholders $43.31. “While we can’t completely rule out a higher offer, we also can’t eliminate the possibility that the deal is not approved,” the analysts say. “With a bid on the table at $43.31, and upside potential/downside risk that are balanced, we are moving to the sidelines.”

Kim and Nussbaum base the decision on the possibility that the price tag is lower than Reckson is worth. The pair’s current Net Asset Value “estimate is $45.50 at 5.7% cap rate, and our forward 2Q07 NAV is $46.14 at a 6% cap rate.” With these projections, they contend the door may be open for a higher bid, although several factors decrease that probability: Reckson went through an open-sale process–entertaining several bids–and independent board members fully vetted the deal, according to the analysts.

Kim and Nussbaum also believe “shareholders could stir the pot both ways.” The day after the deal was announced, the analysts spoke with some shareholders who raised concerns with the price of the deal. “If RA/SLG believe shareholders won’t approve, a sweetened offer from SLG is possible,” the analysts say. “That said, SLG could just as easily walk away and let shareholders veto the deal. If the deal were to fall apart, we believe RA’s image would be tarnished, putting pressure on the stock.”

On the other side of the transaction, Kim and Nussbaum report that SL Green may come out the winner. “Through attractive financing and the carve-out of most of the suburban assets, we believe SLG structured the acquisition so that it may be accretive in 2007, while strengthening its Midtown Manhattan position.” The two add that their research puts SLG’s final bill at $580 per sf, on a pro rata basis, for the assets it will walk away with, and they estimate a cap rate of 5.2% on 2007E NOI. “While by no means a bargain, the pricing is consistent with recent office sales comps in the New York City market, and attractive for a complementary portfolio this size.”

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